Rep. William L. Owens has joined the ranks of Rep. Ron Paul on a bill that would subject the Federal Reserve System to more congressional scrutiny.
But aside from a general call for more oversight, theres little ideological accord between Mr. Owens, D-Plattsburgh, and Mr. Paul, a libertarian Republican of Texas who wants to end the Fed.
There are always going to be disputes about Fed policy, Mr. Owens said. The line were trying to walk here is between transparency and making sure we dont politicize the Fed. Its not one thats easy to manage.
The issue for Mr. Owens isnt any sort of deep-seated objection to the Federal Reserve or the actions it has taken to address the nations economy, which Mr. Owens said have been reasonable given its authority. Instead, he wants an audit of the Feds decision-making process to make sure that nothing improper happened in one isolated incident.
During the market tumult of the 2007-09 financial crisis, bankers provided false information so they could manipulate the London interbank offered rate for their own benefit, according to the news agency Reuters. The rate is hugely influential, helping determine the interest rates on loans taken out by college students and car buyers.
How could the rate scandal have been headed off? Did Federal Reserve officials know it was a major problem, and did they do enough to address it? Those questions, and more, could be answered by a Federal Reserve audit, Mr. Owens said.
But the law itself would only open the Fed up to audits about its monetary policy discussions. Its financials are already vetted by outside accountants and the Government Accountability Office.
The audit, though, still could capture how Federal Reserve officials dealt, or did not deal, with red flags surrounding rate manipulation.
Im not trying to second-guess anybody, Mr. Owens said. Im saying we need to know what processes they used.
The bill, which is supported by Republicans in the House, doesnt have much of a chance in the Democrat-controlled Senate, according to news accounts. Fed Chairman Ben S. Bernanke came out against the additional audit requirements, saying at a House hearing this week that additional oversight runs the risk of politicizing the nations monetary policy.
Thats a much different approach from the one that Mr. Paul has taken. Mr. Paul has been a constant critic of the Federal Reserve and Mr. Bernanke. The Fed sets interest rates and controls the nations money supply. Mr. Paul claims it has done so in a capricious and damaging way. He lays the blame for the nations fiscal crisis solely at the feet of the Federal Reserve system and says it should be abolished.
Mr. Owens doesnt agree with that.
In general, I am comfortable with the steps that the Fed has taken, Mr. Owens said. I think theyve used the tools in the toolbox. I think that they have used those reasonably well.
Critics like Mr. Paul believe that loose monetary policy with more money in the system to help move the economy out of the doldrums will irreparably damage the economy, leading to rampant inflation. The Fed has kept interest rates near zero since the beginning of the economic crisis. In that same time, inflation has not been a factor.
On the opposite end of the ideological spectrum, some economists have said that the Fed hasnt been active enough in spurring the economy.